14 February 2020 18:31
Royal Bank of Scotland is changing its name to NatWest plc new boss Alison Rose said today, as the bank seeks a clean break from the financial crisis era that saw it slowly rebuild after near-collapse. Rose unveiled the bank's annual results and announced a new strategy, which also includes halving the bank's investment arm and stopping all lending to companies which do not have a climate plan. Bosses said the rebranding was motivated by the fact that 80 per cent of customers bank with the NatWest brand, rather than through RBS branches, adding that it will have no impact on customers or staff. ‹ Slide me › RBS is changing its name to NatWest. It said 80% of customers bank with the NatWest brand (right), rather than through RBS branches The banking giant also revealed a 5p-a-share special dividend, although the full-year dividend was cut to 3p from 3.5p, meaning the UK government, which is still its biggest shareholder, will receive nearly £600million.
The payment is possible because the bank managed to hit an operating profit before tax of £4.2billion last year - up 26 per cent from £3.4billion in 2018, marking the bank's third straight year in the black. However Natwest Markets, its investment banking arm, made a loss of £121million last year and the bank had to pay out £900million to compensate those who were mis-sold payment protection insurance (PPI). The investment bank division's poor performance has led RBS to unveil the plan to halve the division's assets to £20billion. RBS' cost to income ratio fell sharply to 65.1 per cent from 71.7 per cent, driven in part by cost reductions of £310million. The bank also saw net impairment losses jump to £700million.
Rebranding: Some 80 per cent of customers bank with the NatWest brand 'We are setting ourselves the challenge to at least halve the climate impact of our financing activity by 2030, and intend to do what is necessary to achieve alignment with the 2015 Paris Agreement,' the bank said. Meanwhile, the bank remained cautious about the year ahead and warned of continuing pressure on income. Richard Hunter of Interactive Investor said: 'The constant and necessary reinvention which has plagued RBS over the last decade shows no signs of abating as the new chief executive takes the reins.' 'The newly proposed measures are far-reaching and range from the intangible – a transformation to a 'purpose-led' bank and the re-emergence of the NatWest name for the group, 20 years after the hostile takeover by RBS – to the tangible, such as the large scaling down of the NatWest Markets business and a committed focus on cost reduction,' Hunter continued. 'On a positive note, some of the heavy lifting has already been done. The disappointing third-quarter performance, which included an additional £900 million PPI provision, seems to have been an anomaly rather than a trend in the context of the year as a whole. Pre-tax profits surged by 26 per cent and were above expectations.' Boss Alison Rose unveiled the bank's annual results and announced a new strategy RBS shares, which have risen about 30 per cent in the last six months, closed 6.8 per cent lower at 213.10p on Friday. 'Every rose has its thorn; scratch beneath every RBS quarterly update and you'll find a sting or two', Markets.com analyst Neil Wilson said. 'The cautious outlook, with management expecting a 'challenges' to income ahead, and weaker NIM are part of the problem,' he added. Donald Brown, senior investment manager at Brewin Dolphin, said the results show the bank has been recovering steadily since turning a corner last year but there's still some way to go. 'An increase in profits is good news for investors, but employees will be fearful of yet further job cuts in the investment banking division while re-branding the parent company to NatWest is clearly another way of making a break with the past,' he said. 'The net interest margin, however, remains under pressure and there is a distinctly cautious tone from management about the outlook for the year ahead. 'A very different bank to what it once was, RBS remains on the road to recovery but the government's stake will likely continue to hang over the share price.' RBS to switch name to NatWest in symbolic change of course Royal Bank of Scotland Group (LON:RBS) saw its share price drop during Friday trading, despite the good progress booked in its full-year fundamentals. The new RBS Chief Executive Alison Rose also said the company would change its name to 'NatWest', in an effort to move away from its wrongdoings before and during the 2008 financial crash. The company performed well during the full-year, reporting an operating profit before tax of £4.23 billion, up from £3.36 billion a year earlier – this represents a third consecutive year of profit for the company. RBS shareholders fared similarly well, with basic diluted EPS up from 13.4p to 25.9p, and a further £968 million being paid out in dividends, with £600 million of this sum going to the UK government. The biggest news today, though, was the company's announcement that it would be undertaking a strategic change of course, with new Chief Executive Alison Rose at the helm. This was signposted by the name-change announcement, and a statement saying its NatWest Markets investment bank was set for a: "significant transformation" RBS said it would half its number of risky assets and would stop lending and offering underwriting services to major oil and gas producers that fail to outline credible climate change prevention plans, with the possibility of extending these measures to coal companies. While these moves appear positive, the company declined to comment on the strong possibility of job losses and branch closures as part of a plan to cut costs by £250 million in 2020. Rose said these measures are being implemented in an effort to create a "smaller and simpler bank". Today's updates came after a mixed end to 2019, with RBS and Lloyds (LON:LLOY) both landing themselves in hot water after failing a Bank of England test. However, the company were pleased to announce plans to launch its standalone online bank, Bó. RBS Outlook Within its outlook for 2020, the company said, "In the current environment, and recognising ongoing market uncertainty, we continue to expect challenges on income. In addition, we anticipate that regulatory changes will adversely impact income in our personal business by around £200 million." "We plan ongoing operating cost take out by reducing operating expenses excluding strategic costs, litigation and conduct costs and operating lease depreciation costs by £250 million in 2020 compared with 2019. We expect to incur £0.8-1.0 billion of strategic costs during 2020 resulting from a refocussing of NatWest Markets and the continued resizing of the Group's cost base. We anticipate that NatWest Markets exit, restructuring and disposal costs will be around £0.6 billion in 2020, with around £0.4 billion as disposal losses through income and £0.2 billion through strategic costs." Investor notes Following the update, the company's shares have dipped 6.30% or 14.40p to 214.30p per share 14/02/20 15:46 GMT. Analysts from Shore Capital reiterated their 'Hold' stance on RBS stock, while the company's p/e ratio is 16.94, and their dividend yield stands at 2.57%.